The seven-minute drop in the Dow Jones Industrial Average touched off by a single tweet falsely claiming the White House had been bombed. It temporarily wiped out about 1 percent of the average, which can translate into millions or billions of dollars in market capitalization.

Stock prices plunged and then quickly recovered after a Twitter account belonging to the Associated Press was hacked and used to send a bogus report falsely claiming that the White House had been bombed and President Obama was injured.

"The @AP Twitter account has been suspended after it was hacked," an unaffected Twitter account belonging to the news organization confirmed. "The tweet about an attack on the White House was false."

In a testament to the power that social media has on real-world finances, the Dow Jones Industrial Average fell 150 points, or about 1 percent, immediately following the tweet, with other indexes reacting similarly. The Dow quickly regained the lost ground about seven minutes after the sell-off began, when the AP confirmed that the report was false.

The bogus tweet was sent from one of at least of two compromised Twitter accounts belonging to the Associated Press. Mike Baker, a reporter with the 167-year-old news organization, said the AP's mobile Twitter account was compromised as well. "The @AP hack came less than an hour after some of us received an impressively disguised phishing email," he wrote in a separate Twitter dispatch. In recent days security personnel with the news cooperative discovered malware had infected some of its computers, officials told the New York Times.

An AP spokesman said officials are working with Twitter to investigate how the accounts were hacked. Both accounts were suspended at the time of this writing.

People claiming ties with a group known as the Syrian Electronic Army took credit for the compromise and provided this screenshot, purporting to show user control over the @AP account, as proof. The same group has taken credit for compromises of Twitter accounts belonging to National Public Radio, and the CBS network.

Enter trading bots

It's not yet possible to confirm those claims. Either way, whoever initiated the sell-off—and potentially well-positioned traders who immediately recognized the report was false—had the ability to make huge profits by manipulating the market capitalizing on the false news, according to this analysis from Quartz. The business news service explains:

Mom-and-pop traders could hardly move in time to profit off the dip, but seven minutes is an eternity in the world of high-frequency trading, where equities are exchanged in fractions of a second. Trading bots could certainly have bought index funds at the bottom of the plunge, quickly profiting as the rest of the market realized that the AP tweet was wrong.

And imagine if whoever hacked the AP’s Twitter account intended to profit from it. He, she—or, as it currently appears, the Syrian Electronic Army—could have shorted an index fund, or bet that it would fall, then quickly purchased stocks before the rest of the world realized what happened.

Twitter has said it's in the process of rolling out a new "two-factor authentication" service that will allow users to use cell phones or other "out-of-band" services to log into accounts. Such features shouldn't be seen as a panacea for account compromises, since hackers have ways bypassing the additional measures. Still, with the ability for a single tweet to wipe out hundreds of millions or even billions of dollars of market value, however briefly, here's hoping that Twitter and affected news organizations soon figure out a way to lock down their accounts.

Promoted Comments

I don't get why any particular stock should drop after news like this. (And hence the market as a whole, I suppose.)

"OMG the white house blew up, SELL GOOGLE!"

Perceptions of future volatility and risk or uncertainty increased. Would it mean future war and more government debt to finance it? What does it mean for federal policy on any number of issues if the president would possibility be killed?

I don't get why any particular stock should drop after news like this. (And hence the market as a whole, I suppose.)

"OMG the white house blew up, SELL GOOGLE!"

Well, yes, it makes complete sense. Think about it, if it was true then people would probably be worried about what is going to happen in the future. When people worry about the future they spend less and hoard their money. That means less sales for businesses, less profits, and thus lower stock prices. Additionally, stock holders probably also want to liquidate their positions to also have money on hand in case they need it.

The thing about the stock market is not about what you think it is worth or even what it actually is worth. It is about what everyone else thinks it will be worth in the future. If they don't think it is going to grow as quickly as another stock then there will be less demand for the stock and its value will go down.

Seems to me that saying a seven-minute, 1% drop "rocked the markets" is a little hyperbolic.

Yep, crazy hyperbole. Until you hear how much money changed hands because of that drop.

It'd be interesting to see who hit the "buy" button immediately after this release.

Edit: In fact, I am quite surprised at the number of people saying "Pfft - one percent when the market moves more than that every day". The important bit is that while the market moves every day, people are not supposed to know in advance the direction it'll be moving at a particular point in time. By knowing that news like this was going to be published on Twitter at a certain time, you would be able to (for instance) prepare to buy military and security equipment stocks, dump your health care stocks, and do a few other money-makers just on the basis that you're using exactly the same software as everyone else on the street and you know what it says to do if the White House is bombed.

I don't get why any particular stock should drop after news like this. (And hence the market as a whole, I suppose.)

"OMG the white house blew up, SELL GOOGLE!"

Well, yes, it makes complete sense. Think about it, if it was true then people would probably be worried about what is going to happen in the future. When people worry about the future they spend less and hoard their money. That means less sales for businesses, less profits, and thus lower stock prices. Additionally, stock holders probably also want to liquidate their positions to also have money on hand in case they need it.

The thing about the stock market is not about what you think it is worth or even what it actually is worth. It is about what everyone else thinks it will be worth in the future. If they don't think it is going to grow as quickly as another stock then there will be less demand for the stock and its value will go down.

Because it is primarily controlled by trading bots with orders to do X when Y happens so X occurs nigh automatically. Wall Street isn't a bunch of guys yelling out trades on the floor like some 1980s movie, well it might be in part, but it is primarily a bunch of special software automatically doing everything.

And that is the scariest fucking thing I have read all year.

You know what is scary? Those bots are controlled by, not investors, but speculators. They don't give a fuck if their actions tank a stock of an otherwise healthy corp, as long as they sell before that happens.

The bad news about a stunt like this is that it can cause a big dip in a short period of time.

The good news about a stunt like this is that it doesn't exactly last very long.

While we should all be a bit worried about the stock markets being manipulated by quick-acting bots, the reality is that those same mechanisms quickly restored the DJIA (which is up 150+ points on the day). It's hard to point at this and say "we shouldn't trust these automated systems", but the reality is that if someone had "hacked" a newspaper and printed out a fake story, the day-long confusion and sell-off would panic markets far worse.

By the time most people heard about this, the system had already self-corrected. So while someone in the know could have profited off of this because of the quick-acting nature of the markets...those same mechanisms also stopped the sell-off from spreading to the masses and causing a larger downturn.

Still, it's certainly worth thinking about how we want our stock market to function, and whether it's become too powerful of a force in our economy.

.... I don't think it's a reasonable expectation that the casual investor should be able to take advantage of intraday moves like this; it's not your day job. Most active traders, on the other hand, should have been able to pounce on this opportunity, provided that they correctly recognized that the tweet was fake and decided to speculate on a quick price recovery...

Wait, you seem to be saying casual investors should not be able to take advantage, but possibly you meant should not bother trying? Because it seems slightly arrogant for you to decide who should and shouldn't be able to take advantage of market fluctuations.

Stock prices plunged and then quickly recovered after a Twitter account belonging to the Associated Press was hacked and used to send a bogus report falsely claiming that the White House had been bombed and President Obama was injured.

Really ? An AP Twitter feed can control the stock market ?

This just proves how assinine the Stock Market and Wall Street are relying on Twitter Feeds or "popular trends" in some fashion. Why the fuck should this matter ? Wall Street has been trading stocks for 100± years without ever relying on crap spewed from some fly by night info source.

This is stupid to allow something like this affect the economy. Sounds like Congress needs to update the safe guards the New Deal implemented if things like a Twitter Feed post OR Steve Jobs going into the hospital can drastically swing the value of public stock.

Why are people on Wallstreet so god damn jumpy? Why can't people fucking take bad news into stride? Until you see it on ALL of the news services and at least some kind of official statement that is NOT twitter based, people need to grow some fucking balls.

Its automated no humans needed, thats the problem with high frequency trading. The stock market could crash before an one has time to respond

Saying "mom-and-pop traders" makes it seems like normal people are affected by this. They're not. Nobody's retirement account is affected by a brief dip in the market.

The people getting hammered by HFT are day traders. They're the ones pushing to regulate HFT by tricking you into thinking that it's regular people being affected, when in reality they just upset about getting their lunch eaten.

Unless the article was edited before I read it ... He is saying ma & pa traders weren't able to "benefit/profit" from the dip cause they wouldn't have been able to react as quickly as those who were able to. Yes, regular people weren't affected, the money just shifted between some uber-rich folk.

Stock prices plunged and then quickly recovered after a Twitter account belonging to the Associated Press was hacked and used to send a bogus report falsely claiming that the White House had been bombed and President Obama was injured.

Really ? An AP Twitter feed can control the stock market ?

This just proves how assinine the Stock Market and Wall Street are relying on Twitter Feeds or "popular trends" in some fashion. Why the fuck should this matter ? Wall Street has been trading stocks for 100± years without ever relying on crap spewed from some fly by night info source.

This is stupid to allow something like this affect the economy. Sounds like Congress needs to update the safe guards the New Deal implemented if things like a Twitter Feed post OR Steve Jobs going into the hospital can drastically swing the value of public stock.

Some question how much the stock market actually affects the economy, certainly this didn't. Panic in a real disaster could, which is why the stock market some times pauses or closes early during disasters the result in a crash scenario.

"Rocks markets"? Really? Your own cited graph shows that the DOW Index (the most useless index of all the indexes) dropped back to where it ended the day yesterday. Losing half a day's worth of gains would be totally insignificant even if it hadn't recovered soon after.

Also, is it millions? Or billions? When your range of estimation spans more than an order of magnitude it ceases to be an estimate and instead becomes a wild guess.

Seems to me that saying a seven-minute, 1% drop "rocked the markets" is a little hyperbolic.

Yep, crazy hyperbole. Until you hear how much money changed hands because of that drop.

It'd be interesting to see who hit the "buy" button immediately after this release.

Edit: In fact, I am quite surprised at the number of people saying "Pfft - one percent when the market moves more than that every day". The important bit is that while the market moves every day, people are not supposed to know in advance the direction it'll be moving at a particular point in time. By knowing that news like this was going to be published on Twitter at a certain time, you would be able to (for instance) prepare to buy military and security equipment stocks, dump your health care stocks, and do a few other money-makers just on the basis that you're using exactly the same software as everyone else on the street and you know what it says to do if the White House is bombed.

I don't see why people are trying to make a bigger issue out of this than it is regarding HFT. First of all, had the news been true, the correct move would have been to sell the market. Any human would have done that.

Again......The stock market, in its present state, has less to do with how a company is actually performing than the perceptions of how they will perform or the perceptions about the state of the economy.

Its slowly becoming comparable to the Vegas sports betting (though I suspect sport bookies are propbably better with their projections).

"Minutes later, the AP said the tweet was a fake resulting from hacking by an outside group, and the White House confirmed there were no explosions. But traders employing so-called algorithms that automatically buy and sell shares after scanning news feeds—including posts on social media sites such as those run by Twitter Inc. and Facebook Inc. FB +0.19% —had already taken action."

"Such computer programs "are incredibly sophisticated," said Eric Pritchett, chief executive at Potamus Trading, a brokerage firm that specializes in electronic trading. A program "reading the feed and seeing 'blowing up' can also read the one saying the account was 'hacked,' " he said."

I doubt this attack was done in order to make money. But the next one will be.

As others said, a large amount of money moved around, even if the net was zero. And only certain groups could have responded quickly enough? We should be keeping an eye on them. And remember that certain entities in the market are nation states, rather than corporations.

Since when can you embed links into emails that re-direct to another page?

Also, some HFT algos have been monitoring news, and specifically tweets, for a good amount of time now. That world works on the <10^-4 time scale so yes, 1 second makes all the difference.

As for how it causes a flash crash, the algos monitoring the tweets see the news, they dump index options/ETFs, other algos that monitor those securities have to cover and dump the underlying securities, then whole thing cascades. Quite perturbing.

The stock market is bullshit and this is why I don't use it. Stupid stuff like this and the previous error that had to be "unwound". It's supposed to be whether or not a company is doing well. Instead it's just robot lemmings.

You're not taking into account future earnings. The only thing that gives shares their value - ultimately - is the value of future dividends. Not just the NEXT dividend, but all of them in future (you only need to pay for shares once!). Yeah, there are lots of day traders (buy! sell! etc), but there are also plenty of people looking for a long term investment too. It's like oil traders - lots of people trade oil, but some actually want to use it, too.

The reason Google's is so inflated, for example, is anticipation they might be the most profitable company in the world in say, 20, 30 years. That anticipation might be misplaced, but it's always grounded in that. If shares didn't have dividends, they would be worth nothing.

The issue, of course, with dealing with stuff so far in the future, is that risk becomes more and more of an issue. If the White House gets bombed, yeah, there's a slightly increased probability that the US will be embroiled in an expensive, economically damaging war. And that will affect everyone's profits - and thus their dividends.